Carl LaSala of LaSala Sonnenberg discusses redevelopment opportunities associated with box stores. Greg Bates, Ed Elder and Pat Beckner observe.
Mike Fishman answered in the affirmative. He argued that as long as there is competition among various government jurisdictions to induce projects to come to their way, come they will. This is especially true for big users, the ones that generate a tremendous amount of sales tax, like the big boxes and the department stores. “They are going to demand [incentives]” Fishman said, “and they’re going to get them.”
STAR Bonds stopped making sense, Block argued, when the City of Olathe expressed interest in the program as a way to build an arena or a big Sears store. “People are building shopping centers and apartments and office buildings and every other kind of development out there without significant help.” Block added.
The point may be moot in any case. As Fishman noted, “The arena development in Olathe is, for all intents and purposes, dead.”
Incentives aren’t limited just to retail. “You look at every major deal in the metropolitan area,” Olen Monsees observed,” and it is going to have some type of tax incentive, special TIF (tax increment financing) or whatever, and that’s just the way big deals are going.”
Field believes that in Kansas City the whole issue is fueled by the fact that the area has multiple jurisdictions spread over two states. “The competitiveness here,” she added, “is more fierce than in cities where you have some kind of collaboration and cooperation.” Field does not see an end to the competition in the immediate future.
As Fishman observed, even the effort on the Kansas side to prevent municipalities from competing with each other has not worked very well “because whatever the parameters of that agreement were, every deal seems to somehow transcend the parameters.”
Nunnink senses that the pendulum may be ready to swing back away from public incentives, given that “legislatures are now pulling back.” Still, he cautioned his colleagues that there is no way for inner cities to compete with greenfields, unless there is some sort of public incentive to acquire the property and redevelop the site. According to Nunnink, the trick is determining the amount and where can it be utilized.
Carl LaSala added a wrinkle. The competition, he argued, is not just between the greenfields and the cities, or between Kansas and Missouri. “It’s between us and the rest of the country, because those companies do not necessarily have to be in Kansas City.”
A problem unique to this area, as Field sees it, is that Kansas is spending its economic development money in competition with Missouri. “I mean,” said Field emphatically, “Kansas City is competing within itself. They’re spending Kansas funds to incent tenants to move from downtown to the suburbs.”
“I think one of the things we’re bringing out,” Beckner added, “is that there are very appropriate places for a TIF and those kinds of things, and then there are maybe excesses.” He observed that the concept of TIF is necessary if developers are going to build and give an area value.
As to adding value, Block wondered if “the sales tax dollars aren’t real dollars anymore.” They may represent little more than money being moved from one site to another. New property values, however, are created, and there may be a move afoot to limit the sales tax piece of a TIF.
In the last year or two, Downtown Kansas City has shown some extraordinary new life. The question was raised as to whether that life was illusory or sustainable.
The key to sustainability, Field observed, was “job growth.” And the growth trends in downtown office space have not been encouraging. Residential growth, however, has been “tremendous.” Ideally, employers—especially the more creative and entrepreneurial firms—will move downtown because there’s a young workforce there waiting to be tapped. “But what we really need,” Field contended,” are the big organizations to come in to fill the inner core, the loop. The loop is where the real problem lies.”
“The hottest real estate market in Kansas City right now,” said Bates, “is right where we’re sitting, Crossroads.” He described the area from the river to the Plaza as a busy owner/entrepreneur-driven area. With the exception of the two big office towers in the central business district, he sees a wide-ranging resurgence spurred by a change in demographics.
Fishman agreed, but saw a cloud on the horizon—the lack of basic retail services to accommodate the people who live in the area. Without them, Fishman added, “I think what we’re going to experience is a real speculative bubble.”